Q: My wife and I have been reading Ilyce’s book, “100 Questions Every First-Time Home Buyer Should Ask,” and one of the big things we took from the book has to do with agents representing both buyers and sellers.
I was assigned an exclusive buyer agent in the Milwaukee area and we met with him last week. He said he was the only exclusive buyer agent in the entire area. This seems odd, given how many Realtors are out there. We met with a Realtor from a different company tonight and were told there were 200 agents who worked out of her office.
I guess our question is whether an exclusive buyer agent sounds too good to be true. It seems to us like the obvious route to take, but we find it odd that nobody does it.
Just wondering if there are any negatives, or something we wouldn't get with an exclusive buyer agent that we would get with a more traditional real estate agent or company.
A: Thanks for the kind words about Ilyce’s book. You raise an interesting question about how agents present themselves and whom they represent.
First, a definition: Exclusive buyer agents only represent buyers. They never represent sellers or take listings. Because they never represent sellers, they can never be caught representing both sides (buyer and seller) in the same transaction. Also, they tend to work on their own rather than for a traditional broker. Their exclusive fiduciary duty is to their buyer, so they never have a conflict of interest.
Traditional agents represent both buyers and sellers and they will from time-to-time find themselves representing both buyers and sellers in the same transaction. When that happens, they will often pick one side or another and find another agent in the office to represent the other side of the transaction.
But since the agent already knows the personal financial details of both parties, it’s hard to be a fiduciary (that is, to represent the interests of one side in the transaction exclusively), so the National Association of Realtors came up with the idea of “nonagency” or “transactional brokerage.” In other words, you represent neither side, rather than pick the buyer or the seller.
The problem is that even if your agent picks you and another agent in her office takes the other side, you can still have agency issues. Agents do talk among themselves inside the office, and you can have private financial details emerge in a way that could hurt one side or another (instead of helping).
Exclusive buyer agency means you never need to wonder if your agent is sharing details with the seller that should remain private. And while that sounds fantastic, there are some negatives.
First, the exclusive buyer agent you work with typically has to work a rather large metropolitan area rather than concentrating on a few small neighborhoods or towns. There is less chance the agent will know the ins and outs of a particular type of housing stock.
Also, in a hot market the exclusive buyer agent may get locked out of pocket listings. These are listings with a “coming soon” sign, but that may be available to the other agents who work for the same company.
Traditional agents, like the Realtor you met, call themselves “buyer agents” but they typically are not exclusive buyer agents. They represent buyers and sellers in different transactions and sign agency disclosure agreements to show to whom they owe their fiduciary duty in a particular deal. But if they act as a buyer agent and show their own listing to the buyer, and the buyer likes it, then the fun begins, as they must hand off either the listing or the buyer to a different agent.
What you really want is to work with an agent who understands your wants and needs, and who can help you look at all sorts of homes in your neighborhoods of choice. As long as you have a smart agent who listens to you, and responds accordingly, you’ll have a good experience whether it is a buyer or exclusive buyer agent.
Good luck with your home purchase.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, ThinkGlink.com.